UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 Or 15(d) Of The Securities Act Of 1934
For the quarterly period ended November 30, 2003
Commission file number: 0-26217
CHINA NETTV HOLDINGS INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 98-02031-70
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(State or other jurisdiction of (IRS Employee Identification No.)
incorporation or organization)
Suite 830 - 789 West Pender Street, Vancouver, B.C. V6C 1H2
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(Address of principal executive offices)
(604) 689-4407
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(Issuer's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common Stock, $0.001 par value 37,446,200
(Class) (Outstanding as of January 15, 2003)
CHINA NETTV HOLDINGS INC.
FORM 10-QSB
INDEX
Page
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Part I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet of China NetTV Holdings Inc. and
Subsidiary at November 30, 2003....................................................F-1
Consolidated Statement of Operations
for the six and nine months ended November 30, 2003 and 2002
and for the Period September 15, 1998 (date of inception) to
November 30, 2003..................................................................F-2
Consolidated Statement of Cash Flows
for the nine months ended November 30, 2003 and 2002
and for the period September 15, 1998 (date of inception)
to November 30, 2003..............................................................F-3
Statement of Changes in Stockholders' Equity
for the period September 15, 1998 (date of inception) to
November 30, 2003...................................................................F-4
Notes to Financial Statements...........................................................F-5 - F-6
Item 2. Management's Discussion and Analysis or Plan of Operation...............................3
Item 3. Controls and Procedures.................................................................6
Part II - OTHER INFORMATION
Item 1. Legal Proceedings.......................................................................6
Item 2. Changes in Securities...................................................................7
Item 3. Defaults Upon Senior Securities.........................................................7
Item 4. Submission of Matters to a Vote of Security Holders.....................................7
Item 5. Other Information.......................................................................7
Item 6. Exhibits and Reports on Form 8-K........................................................7
Signatures.......................................................................................8
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
CHINA NETTV HOLDINGS, INC.
(Development Stage Company)
BALANCE SHEETS
NOVEMBER 30, 2003 AND AUGUST 31, 2003
November 30, August 31,
Stated in U.S. dollars 2003 2003
(Unaudited) (Audited)
- --------------------------------------------------------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents $ 559,474 $ 48
Accounts receivables 35,771 -
-------------------- -------------------
595,245 48
Equipment, net of accumulated depreciation 18,501 -
-------------------- -------------------
Total Assets $ 613,746 $ 48
==================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable - related parties $ 118,945 $ 156,943
Accounts Payable 50,230 97,895
-------------------- -------------------
169,175 254,838
Commitments and Contingencies - -
Stockholders' Equity
Common Stock : $0.001 Par Value
Authorized : 200,000,000
Issued and Outstanding : 60,335,200 (8/31/2003: 44,285,200) 60,335 44,285
Additional Paid In Capital 2,241,913 1,357,963
Accumulated Deficit (1,857,677) (1,657,038)
-------------------- -------------------
Total Stockholders' Equity 444,571 (254,790)
-------------------- -------------------
Total Liabilities and Stockholders' Equity $ 613,746 $ 48
==================== ===================
F-1
CHINA NETTV HOLDINGS, INC.
(Development Stage Company)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 2003 AND 2002 AND
THE PERIOD FROM SEPTEMBER 15, 1998 (DATE OF INCEPTION) TO NOVEMBER 30, 2003
September 15, 1998 to November 30,
Stated in U.S. dollars November 30, 2003 2003 2002
--------------------- ------------------- -------------------
Revenue $ 1,448 $ - 448 $ - -
--------------------- ------------------- -------------------
Expenses
General and administrative 571,422 200,639 14,667
--------------------- ------------------- -------------------
571,422 200,639 14,667
Operating Loss (569,974) (200,639) (14,667)
Other Expenses
Interest (7,703) - -
Loss of investment (1,280,000) - -
--------------------- ------------------- -------------------
Net Loss Available to Common Stockholders $ (1,857,677) $ (200,639) $ (14,667)
===================== =================== ===================
Loss per share attributable to common stockholders:
Basic and diluted $ (0.00) $ (0.00)
=================== ===================
Weighted average number of common shares outstanding:
Basic and diluted 50,166,519 37,446,200
=================== ===================
F-2
CHINA NETTV HOLDINGS, INC.
(Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM SEPTEMBER 15, 1998 (DATE OF INCEPTION) TO NOVEMBER 30, 2003
Stock Additional
Common Amount At Paid In Accumulated
Stated in U.S. dollars Shares Par Value Capital Deficit Total
- --------------------------------------------------------------------------------------------------------------------------------
Balance, September 15, 1998 (date of inception) - $ - $ - $ - $ -
Issuance of common stock for cash @$0.004
on February 5, 1999 15,000,000 15,000 (9,000) 6,000
Issuance of common stock for cash @$0.008
on February 7, 1999 18,750,000 18,750 (3,750) 15,000
Issuance of common stock for cash @$0.04
on February 23, 1999 156,200 156 6,092 6,248
Capital contributions - expenses paid by officers - - 4,500 4,500
Net loss for the year ended August 31, 1999 (18,593) (18,593)
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Balance, August 31, 1999 33,906,200 33,906 (2,158) (18,593) 13,155
Capital contributions - expenses paid by officers - - 4,500 4,500
Net loss for the year ended August 31, 2000 (78,995) (78,995)
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Balance, August 31, 2000 33,906,200 33,906 2,342 (97,588) (61,340)
Issuance of common stock for cash @$0.40
December 2000 through June 2001 2,902,500 2,903 1,158,097 1,161,000
Net loss for the year ended August 31, 2001 (68,153) (68,153)
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Balance, August 31, 2001 36,808,700 36,809 1,160,439 (165,741) 1,031,507
Issuance of common stock for cash @$0.40
on October 17, 2001 387,500 387 154,613 155,000
Issuance of common stock for cash @$0.40
on November 2, 2001 250,000 250 49,750 50,000
Net loss for the year ended August 31, 2002 (1,359,397) (1,359,397)
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Balance, August 31, 2002 37,446,200 37,446 1,364,802 (1,525,138) (122,890)
Issuance of common stock for service rendered
@$0.08 on July 23, 2003 6,839,000 6,839 (6,839) -
Net loss for the year ended August 31, 2003 (131,900) (131,900)
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Balance, August 31, 2003 44,285,200 44,285 1,357,963 (1,657,038) (254,790)
Issuance of common stock for cash @$0.06
on October 29, 2003 15,000,000 15,000 885,000 900,000
Issuance of common stock for 7% finder fees for
shares issued on October 29, 2003 1,050,000 1,050 (1,050) -
Net loss for the three months ended November 30, 2003 (200,639) (200,639)
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Balance, November 30, 2003 60,335,200 $ 60,335 $ 2,241,913 $ (1,857,677) $ 444,571
==========================================================================
F-3
CHINA NETTV HOLDINGS, INC.
(Development Stage Company)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 2003 AND 2002 AND
THE PERIOD FROM SEPTEMBER 15, 1998 (DATE OF INCEPTION) TO NOVEMBER 30, 2003
September 15, 1998 to November 30,
Stated in U.S. dollars November 30, 2003 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities
Net loss from operations $ (1,857,677) $ (200,639) $ (14,667)
Adjustments to reconcile net loss to net cash
Provided by (Used in) operating activities
Loss of investment 1,280,000 - -
Capital contribution for expenses 9,000 - -
Amortization 436 436 -
Issuance of common stock for expenses 50,000 - -
Changes in assets and liabilities
Increase in prepaid expenses (35,771) (35,771) -
Increase in accounts payable 117,672 (47,665) 13,539
-------------------- ------------------ ------------------
Net cash provided by (used in) operating activities (436,340) (283,639) (1,128)
-------------------- ------------------ ------------------
Cash flows from investing activities
Investment in joint venture (1,280,000) - -
Equipment additions (18,937) (18,937) -
-------------------- ------------------ ------------------
Net cash flows used in investing activities (1,298,937) (18,937) -
-------------------- ------------------ ------------------
Cash flows from financing activities
Proceeds from (Repayment to) loan - related party 51,503 (37,998) -
Proceeds from issuance of common stock 2,243,248 900,000 -
-------------------- ------------------ ------------------
Net cash flows used in financing activities 2,294,751 862,002 -
-------------------- ------------------ ------------------
Increase (Decrease) in cash and cash equivalents 559,474 559,426 (1,128)
Cash and cash equivalents - beginning of period - 48 1,882
-------------------- ------------------ ------------------
Cash and cash equivalents - end of period $ 559,474 $ 559,474 $ 754
==================== ================== ==================
Supplemental Information :
Non-cash flows from operating activities
Capital contributions on expenses paid by officer $ 9,000 $ - $ 9,000
Issuance of 250,000 common stock for expenses $ 50,000 $ - $ 50,000
Issuance of 6,839,000 common stock for acquisition
costs $ - $ - $ -
Issuance of 1,050,000 common stock for acquisition
costs $ - $ - $ -
F-4
CHINA NETTV HOLDINGS, INC.
NOTES TO THE FINANCIAL STATEMENTS
November 30, 2003
( Unaudited )
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in conformity
with generally accepted accounting principles in the United States of America.
However, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted or condensed pursuant to the rules and regulations
of the Securities and Exchange Commission ("SEC"). In the opinion of management,
all adjustments of a normal recurring nature necessary for a fair presentation
have been included. The results for interim periods are not necessarily
indicative of results for the entire year. These condensed consolidated
financial statements and accompanying notes should be read in conjunction with
the Company's annual financial statements and the notes thereto for the fiscal
year ended August 31, 2003 included in its Annual Report on Form 10-KSB.
2. New Accounting Policies
The computer equipments and office equipments are depreciated on the straight
line basis over three years and five years respectively.
3. Equipments
November 30, August 31,
2003 2003
Office equipment $ 8,111 $ -
Computer equipment 10,826 -
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Total 18,937 -
Accumulated depreciation $18,501 $ -
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The depreciation expense charged to continuing operations for the three-month
period ended November 30, 2003 was $436 (2002 : $nil).
F-6
CHINA NETTV HOLDINGS, INC.
NOTES TO THE FINANCIAL STATEMENTS
November 30, 2003
( Unaudited )
3. Related Party Transactions
During the three-month period ended November 30, 2003, the Company paid
consulting fees of $65,817 (2002 : $nil) to four directors or companies related
to these directors and benefits of $2,997 (2002 : $nil) to a director.
4. Subsequent Events
As of January 12, 2004, 3,240,000 Series A Stock Purchase Warrants were
exercised and the remaining Series A Stock Purchase Warrants 300,000 were
expired. 250,000 Series B Stock Purchase Warrants were exercised and 2,990,000
Stock Purchase Warrants were outstanding.
F-7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Introduction
The information presented here should be read in conjunction with China NetTV
Holdings Inc.'s financial statements and other information included in this Form
10-QSB. When used in this Form 10-QSB, the words "expects," "anticipates,"
"estimates" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to risks and uncertainties, including
those set forth below under "Risks and Uncertainties," that could cause actual
results to differ materially from those projected. These forward-looking
statements speak only as of the date hereof. The Company expressly disclaims any
obligation or undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in the
Company's expectations with regard thereto or any change in events, conditions
or circumstances on which any statement is based.
Plan of Operations
The Company used proceeds from private placements to fund the Company's joint
venture with Chengdu Qianfeng Digital AV Equipment Co. Ltd. ("Qianfeng"), in the
production of trial digital set-top boxes for Nanning TV in Guangxi Province of
China and to fund other opportunities relating to the growing demand for digital
data transmission technology and solutions for the television broadcasting and
cable industries in China. The Company paid $1,280,000 of the $1,500,000 due to
complete the purchase of the initial interest in the joint venture. However, we
have been unable to complete the terms of the agreement and, therefore, we
elected to expense the initial payment from the company's books and abandoned
the project in the fiscal year ended August 31, 2002. We believe that there will
be no further liability in connection with the agreement.
On July 4, 2003, the Company entered into a stock for stock exchange agreement
to acquire all the outstanding stock of Honglu Investment Holdings, Inc.
("Honglu"), a Chinese mining company that owns prospecting permits and licences
on mineral properties in Tibet, China. On July 23, 2003, the Company issued
97,700,000 shares of its common stock under escrow arrangement pending the
completion of the agreement. The agreement is expected to be completed by
December 31, 2003. In connection with the agreement the Company issued 6,839,000
common shares as payment for the legal cost for the acquisition.
The Company intends to develop gold and other mineral deposits in Tibet and
other areas of China recognizing that China's recent economic growth rate has
placed an increasing demand on the need for domestic production of metals.
Currently, China places fourth in the world wide production of copper but
substantially falls short of its domestic requirements. The development of
partially developed base and precious metal deposit in South Western China is
seen as an opportunity to aid the China in meeting its domestic requirements.
The Company has had no revenues from operations since inception. The operations
of the Company have been financed through private placements and loans.
3
Honglu
Honglu's major asset is a 65% interest in Danlu Resource Development Co. Ltd.
("Danlu"). The remaining 35% interest in Danlu is controlled by two entities:
The Geological Mines Office of the Tibet Autonomous Region (30%) and the Beijing
Headman Mining Evaluation Firm (5%). Directly and through Danlu, a subsidiary
65% owned by Honglu, Honglu controls a significant portfolio of mineral
properties with mining and/or prospecting permits and licenses in Tibet and
retains the rights to conduct exploration on and to develop these properties.
These minerals prospects represent a broad array of potential minerals
including: gold, silver, platinum, copper, iron, lead, zinc, molybdenum, tin,
tantalum, titanium and the rare earths, niobium and osmium. Other minerals could
include corundum, borax, and salt and high quality green granite. Building
materials also include gravel and marble. Several of these properties are at an
advanced exploration stage or have completed pre-feasibility studies.
Results of Operations
The Company has had no operations during the three-month period ended November
30, 2003. The Company received no revenue and incurred expenses of $200,639
stemming from general, administrative and tax expenditures as compared to
$14,667 for the same period of last year. The increase of $185,972 was mainly
due to the consulting fees paid to the directors and consultants for their
services and legal fees incurred.
The Company expects the trend of losses to continue at an increasing rate after
the acquisition of Honglu until we can achieve commercial production on some of
the mineral properties or sell some of mineral properties, of which there can be
no assurance.
Liquidity and Working Capital
As of November 30, 2003, the Company had total current assets of $595,245 and
total liabilities of $169,175. The Company has a working capital of $426,070 as
a result of a private placement of $900,000 in October 2003 after netting off of
general and administrative expenses.
As of January 12, 2004, the Company received $361,500 through the exercise of
3,240,000 Series A Stock Purchase Warrants and 250,000 Series B Stock Purchase
Warrants by their holders.
The Company has no other capital resources other than the ability to use its
common stock to achieve additional capital or exercise of the warrants by the
holders.
Limited Operating History; Anticipated Losses; Uncertainty of Future Results
China NetTV Holdings Inc. has only a limited operating history upon which an
evaluation of the Company and its prospects can be based. The Company's
prospects must be evaluated with a view to the risks encountered by a company in
an early stage of development, particularly in light of the uncertainties
relating to the new and evolving distribution methods with which the Company
intends to operate and the acceptance of the Company's business model. To the
extent that such expenses are not subsequently followed by commensurate
revenues, the Company's business, results of operations and financial condition
will be materially adversely affected. There can be no assurance that the
Company will be able to generate sufficient revenues from the sale of its
products. If cash generated by operations is insufficient to satisfy the
Company's liquidity requirements, the Company may be required to sell additional
equity or debt securities. The sale of additional equity or convertible debt
securities would result in additional dilution to the Company's stockholders.
4
Limited Public Market, Possible Volatility of Share Price
The Company's Common Stock is currently quoted on the NASD OTC Bulletin Board
under the ticker symbol CTVH. As of November 30, 2003, there were approximately
60,335,200 shares of Common Stock outstanding. There can be no assurance that a
trading market will be sustained in the future.
Management of Growth
Upon completion of the acquisition of Honglu, the Company expects to experience
significant growth in the number of employees and the scope of its operations.
In particular, the Company intends to hire additional staff for mineral
exploration and administrative support. Such activities can result in increased
responsibilities for management. The Company expects to experience difficulty in
filling its needs for qualified personnel.
The Company's future success depends upon its ability to raise adequate
financing to meet its mineral exploration and operation expenses. This need to
manage its expenses will place a significant strain on the Company's management
and operational resources. If the Company is unable to manage its expenses
effectively, the Company's business, results of operations, and financial
condition will be materially adversely affected.
Need for Additional Financing
The Company believes it has sufficient capital to meet its short-term cash
needs, including the costs of compliance with the continuing reporting
requirements of the Securities Exchange Act of 1934. However, if losses continue
it may have to seek loans or equity placements to cover longer term cash needs
to continue operations and expansion.
No commitments to provide additional funds have been made by management or other
stockholders. Accordingly, there can be no assurance that any additional funds
will be available to the Company to allow it to cover operation expenses.
If future operations are unprofitable, it will be forced to develop another line
of business, or to finance its operations through the sale of assets it has, or
enter into the sale of stock for additional capital, none of which may be
feasible when needed. The Company has no specific management ability or
financial resources or plans to enter any other business as of this date.
The effects of inflation have not had a material impact on its operation, nor is
it expected to in the immediate future.
Political Risks
The market in China is monitored by the government, which could impose taxes or
restrictions at any time which would make operations unprofitable and infeasible
and cause a write-off of investment in the mineral properties. Other factors
include political policy on foreign ownership, political policy to open the
doors to foreign investors, and political policy on mineral claims and metal
prices.
Market Risk
The Company does not hold any derivatives or other investments that are subject
to market risk. The carrying values of any financial instruments, approximate
fair value as of those dates because of the relatively short-term maturity of
these instruments which eliminates any potential market risk associated with
such instruments.
5
Other Risks and Uncertainties
The business of mineral deposit exploration and extraction involves a high
degree of risk. Few properties that are explored are ultimately developed into
production. At present, none of the Honglu's properties has a known body of
commercial ore. Other risks facing the Company include competition, reliance on
third parties and joint venture partners, environmental and insurance risks,
political and environmental instability, statutory and regulatory requirements,
fluctuations in mineral prices and foreign currency, share price volatility,
title risks, and uncertainty of additional financing.
The Company has sought to identify what it believes to be the most significant
risks to its business, but cannot predict whether or to what extent any of such
risks may be realized nor can there be any assurances that the Company has
identified all possible risks that might arise. Investors should carefully
consider all of such risk factors before making an investment decision with
respect to the Company's stock.
Outlook
After completion the acquisition of Honglu, the Company will concentrate its
efforts on drilling and regional exploration work on the mineral claims
currently held by Honglu and will consider additional projects if and when
opportunities arise. Market conditions have improved substantially with copper
and spot gold prices increasing to multi-year highs and significant attention
has been drawn to exploration companies in China due to the country's record
growth rates and strong demand for basic raw materials and precious metals.
Through the acquisition of Honglu, the Company is well positioned to conduct its
activities and capitalize on opportunities in China.
ITEM 3. CONTROLS AND PROCEDURES
The management of the company has evaluated the effectiveness of the issuer's
disclosure controls and procedures as of a date within 90 days prior to the
filing date of the report (evaluation date) and have concluded that the
disclosure controls and procedures are adequate and effective based upon their
evaluation as of the evaluation date.
There were no significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date of the most
recent evaluation of such, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Part II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
6
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31 Sarbanes-Oxley Certification
32 Sarbanes-Oxley Certification
(b) Reports on Form 8-K filed during the three months ended November 30, 2002.
Current reports on Form 8-K filed by the Registrant during the three
months ended November 30, 2003.
8-K filed October 17, 2003
7
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: January 19, 2004 China NetTV Holdings Inc.
/s/ Ronald Xie
-----------------------------
Ronald Xie
President
8